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Added 4 months ago
#ASX Announcements

30/10/19 Quarterly Report for Q1 of FY20

A decent quarterly result from AER with a third consecutive positive cashflow quarter, albeit a small inflow of $13k. While receipts of $505k were lower than the $554k of 4Q19, there were some one off revenues received last quarter.

A new insurance client was added in the quarter which is positive as insurance clients are AER's largest segment, making up 30% of revenue in FY19.

Importantly though, management stated that the long awaited implementation with Esri is due to launch this quarter, with several clients already targeted as key customers on the Esri platform who could get value from AER's data now available.

I also attended the AGM this year which was very valuable, Kerry and the team were very accomodating with a small product demonstration of how the AER data is being implemented in the Esri software and some examples of how their product drives value for customers. Overall the mood of management and the board is very positive with a lot of expectations for the Esri agreement to drive the scale that AER is capable of. More importantly, I got a lot more confidence of the value of the AER offering to Esri and believe this is a true partnership between the two businesses, not just a reseller agreement where Esri has no incentives to push the AER dataset.

 
Added 3 weeks ago
#ASX Announcements

29/01/20 Quarterly Report for Q2 of FY20

Another solid quarter from AER building the base for what will hopefully be an explosive end to FY20. For the core alerting business inquiries were a record high for the quarter after the catastrophic bushfires. I expected this to be the case after tracking website hits.

Confirmation that Esri integration is complete with pricing agreed and sales materials provided to Esri BDM's is great news.

While the actual result was satisfactory, the business looks to be set up for a strong inflection point moving forward.

 
Added 5 months ago
#Financials

Without the backing of the refund from the gov, they werent able to provide enough growth to make it a profitable year, down about 200K. The 10% gowth highlits potenital problems with how they are gaining more contracts. More growth is neccasassay for a good invesntment. However the goverment did announce early this year a 130 million dollar scheme for "National Disaster Risk Reduction" as this rolls out till 2023, AER may be able to recieve a hand up from the goverment in regards to financial incentives and contracts. https://www.homeaffairs.gov.au/emergency/files/national-disaster-risk-reduction-framework.pdf 

 
Last edited 4 months ago
#Bull Case

Tiny SAAS business that offers risk management software for businesses and people potentially exposed to damage from natural disasters. Core product is the Early Warning Network, a comprehensive offering that allows customers to receive customised alerts and warnings when a potential threat could impact their business, employees or property.

Revenues are 94% monthly subscription based, with growth of 27% in FY18. Management stated they believed this growth was "modest" with ambitions for higher growth in FY19. All FY18 clients have been retained with several new clients onboarded in 4Q18 (including AER's first international client in New Zealand) providing the platform for this growth.

International growth is a focus for management, they have stated numerous times the cloud based SAAS model allows them to scale internationally with no additional resourcing (other than potential sales staff). The other focus for growth is the monetisation of the company's rich database of geographical information through established networks with reseller, revenue share and partnership agreements.

FY18 represented AER's first profitable year of $50k (this did require an R&D tax refund of nearly $500k), with 4Q18 being the company's first operationally cashflow positive quarter of $15k. Given the expected revenue growth with the scalability of operating expenses, I expect the company to grow their operational cashflow and potentially be profitable without the R&D tax refund in FY19.

The profitability was largely driven by an operational review in mid-2017 which saw the company re-focus on it's core EWN product and align it's cost base to annuity revenues. By the end of FY18, monthly cash expenses were more than halved to roughly $100k. Monthly annuity revenue has now grown to $1.4m, exceeding the relatively fixed monthly cash cost base. AER's balance sheet remains extremely clean with no debt or intangibles and over $1m in cash.

 
Last edited 4 months ago
#ASX Announcements

25/10/2018 Quarterly Report for Q1 of FY19

AER reported their 1Q19 quarterly cash report. Receipts were $474k, up 8% on last quarter and 44% on last year. For the second quarter in a row AER was cashflow breakeven, albeit very small ($8k). This fits in with the company's short term strategy of essentially managing growth to the cost base. Impressively, the company looks set to grow revenue even stronger than the 30% last year.

In the management commentary, they noted that the first quarter is traditionally their weakest, but they had received increased enquiries due to recent extreme weather. This bodes well as we come into the fire and storm season.

However, the comment regarding a commercial partnership with technical integration into a leading GIS platform could be major news. The GIS partner reaches three quarters of the Australian/New Zealand market and would allow AER to leverage their dataset with no additional costs and clip the revenue on the GIS customer. Management expects a further update shortly.

 
Added 7 months ago
#Financials
stale

I am a visual learner so a picture always helps me. This shows total expenses, total revenue and NPAT. Is this an inflection point or simply a continuation of the maturation process? 

2015 and 2016 were characterised by personnel additions to sales, marketing and tech teams with marginal improvements in top-line growth. Credit where it is due - seeing the error in their approach and reducing their headcount from 21 to 9 in 2017. Twelve months into the business review and the bleeding has stopped. Can they however, generate enough market penetration with the smaller team to create meaningful revenue growth?

 

 
Last edited 4 months ago
#ASX Announcements

24/04/19 Quarterly Report for Q3 of FY19

A very solid quarter from AER, who reported record cash receipts from customers of $482k, though admittedly helped by collections deferred from the weaker quarter previously. Operating costs were back to normal at $437k after the increase in costs associated with the Esri integration in the previous quarter ($522k).

Commentary also remained positive, with several new clients won during the quarter such as New Zealand Steel, Incitec Pivot, AFCD Port Logistics and DHS. This new business is accretive as all major existing clients renewed their agreements this quarter.

Impressively, growth continues to remain largely organic as the company confirmed that the Esri partnership is still in its early stages and limited to a select number of clients. Feedback has been promising and the company expects full launch and rollout in the future.

 
Added 10 months ago
#Risks
stale

Be aware that shares are extremely thinly traded.

As i write this (15th April), there are only 3 sell orders, one at 6c, one at 15c and one at 19c (!!!!)

It would cost you ~$3k to wipe out all the sell orders.

For this reason it will be extermely difficult for all but the smallest investors to take a stake, it will almost certainly never get any attention (and therefor advocacy) from fund managers. 

It would very tough to sell out in a timely manner.

A shame, as I think there's a lot of potential with this company

 
Last edited 3 weeks ago
#ASX Announcements

30/7/19 Quarterly Report for Q4 of FY19

Cracking quarterly from AER with record receipts of $554k resulting in operating cash surplus of $32k. 15% QoQ receipts growth and leaves the company on an ARR runrate of ~$2.2m.

Management commentary was positive, stating they had signed several new customers while retaining existing subscriptions (even expanding with some clients).

EWN integration with Esri and MDS is now complete and marketing with both services is beginning to ramp up with management stating storm season in 2Q20 a key driver. Interestingly, management also commented they were approached by a government department about licensing their messaging service.

 
Last edited 10 months ago
#Overview
stale

Just some eary notes:

Value Proposition: protect your people and assets from natural and man made risks. It aggregates geospatial data from various soruces (EG BOM.gov.au) 

History

Listed in mid-2015 with a market cap of $16m, and shares at 25c

Lost a major client in early FY17, which supposedly chose a cheaper (although apparently inferior) product. At present, no single client represents more than 11% of revenues.

All intangibles written down to zero in FY17

In FY17 they began significant cost cuts. Reduced staff levels from 21, to 9 FT and 3 contractors.

Clients

Clients include: Insurance, water authorities, councils, construction. But government & Insurance are major customers.

Have >100 large enterprise and government clients

Govt. are slow to convert, but expecting a few to do so over FY19

Inbound sales enquiries tend to come through word of mouth and the ewn.com.au website

More than a few references to these acronyms:

GNIS: Geographical Notification and Information System

EWN: Early Warning Network  

Products: Products are packaged from the core EWN's GNIS. There is the "Intelligent Flood Alerting System", "Intelligent Contractor and Workforce Management System"

Kerry Plowright -- CEO, Chairman and founder. Owns ~40% of the business and is on $150k per year

No debt, $1m in cash. Cash flow positive. Balance sheet extremely clean, with no intangibles or goodwill. Software platform is valued at nothing

For a couple years now the business has been actively seeking strategic acquisitions, and continues to talk about its interests here. Nothing yet executed, which may be a good sign of financial discipline. 

Most revenue is recurring. 

Prospectus here

2015 Annual report here

2016 Annual Report here

2017 Annual Report here

2018 Annual Report here

 

 
Last edited 2 months ago
#Business Model/Strategy

AER CEO Kerry Plowright recently co-hosted a webinar for ESRI clients on the value of the Early Warning Network data API. It provides a good overview on the business and the value it can offer to customers:

https://esriaustralia.com.au/our-people/kerry-plowright-spd-3387

 
Last edited 3 weeks ago
#ASX Announcements

30/1/19 Quarterly Report for Q2 of FY19

AER reported their 2Q cash report. It was weaker than expected with cash receipts of $332k sharply lower than the $474k in the previous quarter. For an annuity business with monthly billing this decline is alarming, however the company did note that the Christmas/New Year period resulted a delay of receivables payments with an increase of $110k over 1Q. Nonetheless, I suspect there has been some small customer churn that was not replaced due to management's focus on the Esri integration.

As forecast in the previous quarter, cash costs spiked $95k to $520k, largely due to extra costs incurred in the Esri integration, however these are now complete and forecast costs for 3Q are $70k lower at $450k.

While the total cash outflow of $218k is not ideal, adjusting for the delay in receivables and one off cash costs of Esri integration and cash flow was essentially neutral for the quarter which is a key part of the thesis for the investment as AER manages their cash flow for growth (essentially increased receipts being used to fund new growth initiatives).

 
Last edited 8 months ago
#Esri Partnership
stale

A partnership deal with Esri has been signed -- see here

Very thin on financial detail, but part of a big strategic shift to deliver their data through established GIS platforms. 

Esri is part of Boustead Singapore, a $350m market cap enginerring and technology company.

The geo-spatial division, to which Esri belongs, generated $116m in revenue last year, and operates on a pre-tax margin of ~25%. (Boustead Annual report is here) Esri has the biggest market penetration for Geospatial Information Systems in Australia -- about 3/4 of market.

Boustead's geo-spatial division has 13,000 clients in the Asia-pacific region. Compared with ~110 or so that Aeeris has

 
Last edited 3 months ago
#ASX Announcements

5/12/18 EWN Partners With Esri

As flagged in their quarterly report in October, AER announced a partnership with Esri, the world's leading provider of Geographic Information System (GIS) software. Esri has a 72% market share in Australia.

This represents a step change for AER who previously attempted to market their own software solution to customers. This ended up competing with already installed GIS software such as Esri, but now that competition becomes an opportunity as they leverage Esri's established customer base with valuable data. 

No financial information was disclosed, but I suspect the partnership is based on a revenue sharing agreement for customers who access AER's data API. Comments were also made that the potential for Esri users to use AER's established notification system is being explored.